ASIC to launch list of unsafe investments

After being heavily criticised over its failure to shield investors from the collapse of investment companies such as Storm Financial, Great Southern and Timbercorp, the Australian Securities and Investment Commission is set to launch a campaign to steer investors away from “unsafe” investment products.

The corporate watchdog’s new campaign aimed at retail investors will borrow from classic beach parlance by classifying investment products as being inside the flags (safe) or outside the flags (unsafe).

“Each person’s flags might be a slightly different width apart and some people are better swimmers than others, but the point is not to split hairs about what is inside and what is outside the flags; it detracts from the simplicity of the message and the force of the metaphor,” ASIC deputy chairman Jeremy Cooper wrote in a recent article published on the ASIC website.

Investments classified as outside the flags include:

– Margin lending
– Debentures
– Mortgage trusts
– Derivates
– Managed investment schemes
– Structure investment products

Investments inside the flags include:

– Bank deposits
– Superannuation
– Standard managed funds
– Blue-chip shares
– Products where independent financial advice has been received

Cooper says that just like swimming at the beach, investing is never risk free. But ASIC’s hope is that investors will at least stop and think before diving into risky investment products.

“If investors ask themselves whether they might be about to swim outside the flags, they can decide their next move. Should they swim back between the flags, get a stronger swimmer to go with them (ie get independent advice) or simply take the risk?

“You are allowed to swim outside the flags; you just need to be aware that’s what you are doing and be ready for the consequences.”